11
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-19620
REDDI BRAKE SUPPLY CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 84-1152135
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5882 South900 East, Suite 202, Salt Lake City, Utah 84121
(Address of principal executive offices)
(801) 269-9500
(Issuer's telephone number)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the issuer was required to file
such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common equity, as of March 20, 2000: 59,224,952 shares of common
stock.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13, or 15(d) of the Exchange Act
subsequent to the distribution of securities under a plan confirmed by a
court. Yes [ ] No [ ]
Transitional Small Business Format: Yes [ ] No [ X ]
Documents incorporated by reference: None
<PAGE>
FORM 10-QSB
REDDI BRAKE SUPPLY CORPORATION
INDEX
Page
PART I. Financial Information 3
Financial Statements 4
Balance Sheets - September 30, 1999 and 5
June 30, 1999
Statements of Operations - Three Month 6
Period Ended September 30, 1999 and 1998,
and Inception of Development Stage to September
30, 1999
Statements of Cash Flows - Three Month 7
Period Ended September 30, 1999 and 1998,
and Inception Of Development Stage to
September 30, 1999
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of 9
Operations
PART II. Other Information 10
Signatures 11
2
<PAGE>
PART I.
Financial Information
In the opinion of management, the accompanying unaudited financial
statements included in this Form 10-QSB reflect all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations for the periods presented. The
results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year.
3
<PAGE>
REDDI BRAKE SUPPLY CORPORATION
(Development Stage Company)
BALANCE SHEETS
September 30, 1999 June 30, 1999
Sept 30, 1999 Jun 30, 1999
ASSETS
CURRENT ASSETS
Cash $ 8,109 $ 9,183
Accounts receivable 12,756 12,756
Total Current Assets 20,865 21,939
OTHER ASSETS
Securities - available for sale - Note 3 2,034 2,034
Convertible debt offering costs - net
of amortization - Note 4 252,261 262,261
$ 275,160 $ 286,234
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 45,154 $ 45,154
Subordinated convertible debt - Note 4 6,900,000 6,900,000
Accrued interest payable convertible
debt - Note 4 3,735,271 3,496,590
Total Current Liabilities 10,680,425 10,441,744
STOCKHOLDERS' EQUITY
Preferred stock
2,500,000 shares authorized at
$0.0001 par value;
60,000 shares issued and outstanding
- Note 5 689,685 682,856
Common stock
75,000,000 shares authorized at
$0.0001 par value,
58,224,952 shares issued and outstanding 5,823 5,823
Capital in excess of par value 36,492,880 36,492,880
Accumulated deficit - Note 1 (47,593,653) (47,337,069)
Total Stockholders' Deficiency (10,405,265) (10,155,510)
$ 275,160 $ 286,234
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
REDDI BRAKE SUPPLY CORPORATION
(Development Stage Company)
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1999 and 1998 and the period
July 1, 1997 (date of inception of development stage) to September 30,
1999
Three Months July 1, 1997
Sept 30, Sept 30, to
1999 1998 Sept 30, 1999
REVENUES $ - $ - $ -
EXPENSES
Administrative 1,074 590 67,700
Interest 248,681 216,637 2,791,393
NET LOSS - before other losses (249,755) (217,227) (2,859,093)
LOSS OF LIQUIDATION OF ASSETS
AND LIABILITIES - - (25,223,711)
NET LOSS $ (249,755) $ (217,227) $ (28,082,804)
LOSS PER COMMON
SHARE
Basic $ - $ -
AVERAGE OUTSTANDING
SHARES
Basic 58,224,952 52,186,949
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
REDDI BRAKE SUPPLY CORPORATION
(Development Stage Company)
STATEMENT OF CASH FLOWS
For the Three Months Ended September 30, 1999 and 1998 and the Period
July 1, 1997 (date of inception of development stage) to September 30, 1999
Three Months
Sept 30, Sept 30, July 1, 1997 to
1999 1998 Sept 30, 1999
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (249,755) $ (217,227) $(28,082,804)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Changes in accounts payable - - 45,154
Loss of assets - - 25,223,711
Accrued interest -
convertible debt 248,681 216,637 2,791,393
Net Cash Used in Operations (1,074) (590) (22,546)
CASH FLOWS FROM INVESTING
ACTIVITIES
- - -
CASH FLOWS FROM FINANCING
ACTIVITIES
- -
Net Increase (Decrease) in Cash (1,074) (590) (22,546)
Cash at Beginning of Period 9,183 18,861 30,655
Cash at End of Period $ 8,109 $ 18,271 $ 8,109
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
REDDI BRAKE SUPPLY CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on
July 12, 1990 with name "Franklin Capital, Inc" with authorized common
stock of 35,000,000 shares with a par value of $0.0001 and preferred
stock of 2,500,000 shares with a par value of $0.0001. On October 24,
1996 the authorized common stock was increased to 75,000,000 shares
with the same par value. The Company had several name changes and on
April 21, 1994 changed its name to "Reddi Brake Supply Corporation".
The principal business activity of the corporation through its
subsidiary, Reddi Brake Supply company, Inc., has been the sale of
auto parts, mainly to professional installers, through several
warehouses located throughout the United States.
On March 17, 1997 an involuntary petition in bankruptcy was filed
against the subsidiary, which resulted in the loss of the business and
the warehouses and as a result of the bankruptcy the Company
sustained substantial losses. After 1997 the Company had no
operations and is considered to be a development stage company since
that date.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company recognizes income and expenses based on the accrual method
of accounting.
Dividend Policy
The Company has not adopted a policy regarding payment of dividends.
Income Taxes
On September 30, 1999 the Company had a net operating loss carry
forward of $47,583,824. The tax benefit from the loss carry forward
has been fully offset by a valuation reserve because the use of the
future tax benefit is doubtful since the Company has no operations and
there has been a substantial change in its stockholders. The net
operating loss will expire starting in 1998 through 2020.
Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share amounts are computed based on the
weighted average number of shares actually outstanding. Diluted net
income (loss) per share amounts are computed using the weighted average
number of common shares and common equivalent shares outstanding as if
shares had been issued on the exercise of the preferred share rights
unless the exercise becomes antidilutive and then only the basic per
share amounts are shown in the report.
7
<PAGE>
REDDI BRAKE SUPPLY CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial Instruments
The carrying amounts of financial instruments, including cash, accounts
receivable, securities, and accounts payable, are considered by
management to be their estimated fair values.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No.
130. The adoption of this standard had no impact on the total
stockholder's equity on June 30, 1999.
Accounting for Stock-Based Compensation
The Company has adopted Statement of Financial Accounting Standards No.
123 but has elected to continue to measure compensation cost under APB
25. The adoption of FASB No. 123 has no impact
on the Company's financial statements.
Recent Accounting Pronouncements
The Company does not expect that the adoption of other recent
accounting pronouncements will
have a material impact on its financial statements.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of the
assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results
could vary from the estimates that were assumed in preparing these
financial statements.
3. SECURITIES - AVAILABLE FOR SALE
Securities consists of 2,034 shares of Micro Transmission Systems. The
fair market value is considered to be $2,034.
8
<PAGE>
REDDI BRAKE SUPPLY CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
4. SUBORDINATED CONVERTIBLE DEBT
On February 9, 1995, the Company completed a private placement of 9%
Adjustable Convertible Subordinated Debentures due 2005 in the
amount of $6.9 million. Interest on the unpaid principal is payable
quarterly on April 30, July 31, October 31 and January 31 of each year.
The Company may call the Debentures after January 17, 1998. The
Debentures are subordinated to all of the obligations due to the
Company's bank and suppliers and are convertible into shares of the
Company's Common Stock at a conversion price of $3.50 per share. The
conversion price is also subject to the antidilution adjustments.
Any holders of shares issuable upon conversion have demand and
piggyback rights to have the shares registered, at the Company's
expense, under the Securities Act of 1993.
The Company received approximately $6.5 million in net proceeds from
the Placement. The offering and sale of the securities in the
placement were not registered under the Act, in reliance upon the
exemption from registration provided by Regulation D. The issuance
costs of $400,000 are being amortized over ten years.
5. PREFERRED STOCK
On March 25, 1996 and April 23, 1996, the Company authorized the
issuance of 400,000 shares of Class A preferred stock at $10 issue
price and 550,000 shares of Class B preferred stock at $10 issue price.
Subsequent to the authorization of the preferred stock, the Company
completed private placements of the 950,000 shares of preferred stock.
The holders of Class A and Class B Preferred Stock are entitled to a
cumulative annual dividend at the rate of four percent of the initial
issue price of $10.00 per share, to accrue quarterly. The dividends can
be paid in cash or in common stock of the Company at the option of the
Company, at the conversion rates outlined below.
The holders of Class A and Class B Preferred Stock will be entitled to
convert these shares into fully paid and non-assessable shares of the
Company's common stock. This conversion is derived by dividing the
original issue price by eighty percent of the average per share high
closing bid price of the Company's common stock for the five
consecutive trading days ending two days before the conversion date,
provided, however that the maximum conversion rate will be $2.25 and
the minimum conversion rate will be $1.50.
The Company received approximately $8.3 million in net proceeds from
the placements. The offerings and sale of the Securities in the
Placement were not registered under the Securities Act of 1933, in
reliance upon the exemption from registration provided by Regulation S.
During 1996 and 1997 all of the preferred A and part of the
Preferred B shares were converted into the Company's common stock
leaving a balance of 60,000 Preferred B shares outstanding.
9
<PAGE>
REDDI BRAKE SUPPLY CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
6. STOCK WARRANTS
On June 30, 1999, the Company had 20,000 warrants outstanding issued
to Software License - IDCS, Inc., which entitles the holder to purchase
one share of Common stock for each warrant at an exercise price of
$5.00 per share of common stock. The date of grant for the warrants was
October 19, 1991 and the expiration date is October 18, 2001.
The market price of the stock on October 18, 1991, the date of grant,
was $2.44 and therefore no value was assigned to the warrants.
7. RELATED PARTY TRANSACTIONS
The officers and directors do not own any of the Company's outstanding
stock.
8. GOING CONCERN
The Company intends to acquire interests in various business
opportunities which, in the opinion of management, will provide a
profit to the Company, however there is insufficient working capital
for any future planned activity.
Continuation of the Company as a going concern is dependent upon
obtaining additional working capital and the management of the Company
has developed a strategy, which it believes will accomplish this
objective through additional equity funding and long term debt which
will enable the Company to conduct operations for the coming year.
There can be no assurance that they will be successful in this effort.
9. LEGAL ACTIONS
McCormick, et al., v. Reddi Brake Supply Corporation., et al.
On November 6, 1997, a class action lawsuit was filed in the Los
Angeles County Superior Court on behalf of all persons or entities who
bought common stock of the defendant prior to March 23, 1996, and/or
who bought or sold any shares thereafter until August 13, 1996,
excluding defendants, their families, employees, agents or assigns.
The complaint asserts causes of action for breach of fiduciary duty by
officers and director and conspiracy to manipulate the price of the
common stock of the defendant. The Reddi Brake Defendants has denied
the claims plaintiffs in the litigation. The parties to the
litigation have entered into a Stipulation of Settlement dated May 21,
1999, dismissing the litigation with prejudice. The Stipulation of
Settlement provides that the Plaintiffs will release the Company from a
$20 million judgement if the Company and individual defendants assign
any and all rights for insurance coverage to the Plaintiffs. As of the
date of this report, the settlement offer remains pending.
10
<PAGE>
REDDI BRAKE SUPPLY CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
9. LEGAL ACTIONS - continued
Maremont Corporation v McGorrian, et al., and Standard Motor
Products v McGorrian et al.
On September 6, 1996, Maremont Corporation filed a lawsuit in the
United States District Court for the Central District of
California against the Company, alleging that the Company owes
the plaintiff approximately $1.2 million for goods sold and
delivered to the Company. The lawsuit does not name Reddi
Brake Supply Corporation, but the Company's indemnification
agreements with the directors obligates the Company to support
the defense.
The Company settled the litigation in October 1999 by the
issuance of 1,000,000 common shares.
Sheerin, et al., v Reddi Brake Supply Corporation, Birin and
McGorrian et al.
On March 3, 1998, Allen J. Sheerin filed a lawsuit in the Los
Angeles County Superior Court against the Company and
specifically against two former officers and directors of the
Company. Mr. Sheerin alleges that these officers and directors
misrepresented the financial status of the Company during the
time that he was negotiating to buy shares in the Company and
which resulted in a loss to him of $2,100,000.
The parties have been negotiating a settlement agreement which
remains unresolved at the report date.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OR PLAN OF OPERATION
The Company has $8,109 in cash and $12,756 in accounts
receivable for total current assets of $20,865. Other assets
include $2,034 in securities available for sale and $252,261 in
convertible debt offering costs. The Company has current
liabilities in the amount of $10,680,425 which include $45,154 in
accounts payable, $6,900,000 in the form of a subordinated
convertible debt and $3,735,271 in accrued interest payable on
the convertible debt.
The Company did not generate any revenue during the
quarterly period ended September 30, 1999. The Company has no
material commitments for capital expenditures for the next twelve
months.
The Company is currently in negotiations with the debenture
holders to settle the debt. The Company believes that its
current cash needs can be met with the cash on hand for at least
the next twelve months. However, should the Company obtain a
business opportunity, it may be necessary to raise additional
capital. This may be accomplished by loans from the principals
of the Company, debt financing, equity financing or a combination
of financing options.
12
<PAGE>
PART II. OTHER INFORMATION
Legal Proceedings:
McCormick, et al., v. Reddi Brake Supply Corp., et al,
L.A.S.C. Case No. BC 180840. On November 6, 1997, the above
action was filed in the Los Angeles County Superior Court as a
class action on behalf of all persons or entities who bought
common stock of Reddi Brake Supply Corporation prior to March 23,
1996 and/or who bought or sold such stock thereafter until August
13, 1996. The complaint assets causes of action for breach of
fiduciary duty by officers and directors and conspiracy to
manipulate the price of the common stock of the Company and
concealment thereof. Reddi Brake has denied and continues to
deny all of the claims and contentions alleged in the complaint.
The parties to the litigation have entered into a Stipulation of
Settlement dated May 21, 1999, dismissing the litigation with
prejudice. The Stipulation of Settlement provides that the
Plaintiffs will release the Company from a $20 million judgement
if the Company and individual defendants assign any and all
rights for insurance coverage to the Plaintiffs. As of the date
of this report, the settlement offer remains pending.
Maremont Corporation v. McGorrian, et al. The Company
settled the referenced litigation in October, 1999, for 150,000
shares of common stock of the Company.
Standard Motor Products v. McGorrian, et al. The Company
settled the referenced litigation in October, 1999, for 850,000
shares of common stock of the Company.
Sheerin v. McCorrian, Birin and Reddi Brake Supply
Corporation, L.A.S.C. Case No. BC 186930. On March 3, 1998, the
above action was filed in the Los Angeles County Superior Court
alleging breach of contract, breach of fiduciary duty, fraud,
negligent misrepresentation, violation of federal securities laws
and violation of California securities laws. The Company has
denied and continues to deny all of the claims and contentions
alleged in the complaint. The parties have been negotiating a
settlement agreement which remains unresolved as of the date of
this report.
Changes in Securities and Use of Proceeds: None
Defaults upon Senior Securities:
The Company is currently in negotiations with the debenture
holders to settle the debt. The Company believes that its
current cash needs can be met with the cash on hand for at least
the next twelve months. However, should the Company obtain a
business opportunity, it may be necessary to raise additional
capital. This may be accomplished by loans from the principals
of the Company, debt financing, equity financing or a combination
of financing options.
Submission of Matters to a Vote of Securities Holders: None.
Other Information:
Exhibits and Reports on Form 8-K.
Reports on Form 8-K: None.
Exhibits: Included only with the electronic filing of this
report is the Financial Data Schedule for the three month period
ended September 30, 1999 (Exhibit ref. No. 27).
13
<PAGE>
SIGNATURES
In accordance with the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.
REDDI BRAKE SUPPLY CORPORATION
Date:3/22/00 By: /s/ John Chymboryk, President
Date:3/22/00 By: /s/ Kip Eardley, Chief Financial Officer
14
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 8,109
<SECURITIES> 0
<RECEIVABLES> 12,756
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,865
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 275,160
<CURRENT-LIABILITIES> 10,680,425
<BONDS> 0
0
689,685
<COMMON> 5823
<OTHER-SE> (11,100,773)
<TOTAL-LIABILITY-AND-EQUITY> 275,160
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,074
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 248,681
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (249,755)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
